Time Warner: Splitting Their Cable

Time Warner has announced that they'll be divesting themselves of the substantial stake they have in Time Warner Cable in what Stacy at GigaOm suggests is the beginning of a "Death by 1000 Cuts" where the ailing Time Warner empire will crumble via attrition as they sell themselves off piece by piece.

Although I'd suggest it is far too early to predict their ultimate fate, it would seem that the Time Warner approach is not what you'd expect from a company that wants to ultimately prevail in the media business. TW was one of the few big companies that saw the coming convergence of offline and online media years ago. With a huge Cable Division, AOL, and Motion Pictures many thought Time Warner was poised to be a major player as media convergence brought economies of scale to the companies management, developments, and production equations. Yet almost the opposite has happened for Time Warner. The stock after the AOL merger fell dramatically and has languished for years, and apparently Time Warner is now deciding to try to extract as much value from the empire as possible rather than build for the future, though perhaps they are reasonably assuming that a tight focus will allow them to become a smaller but more profitable venture.

Will this be death by 1000 cuts or a clever corporate redirection?

Only Time ... Warner ... will tell.

AOL Spheres It With Acquistion

AOL announced today that it purchased Sphere for an undisclosed amount. The company responsible for the "Sphere It" link which appears on a growing number of sites, describes itself as connecting your current articles to contextually relevant content from your archives as well as from blogs, media stories, video, photos, and ads across the web.

According to Ron Grant, AOL President, the acquisition will help AOL enhance content on its own sites and distribute its content across Sphere's third-party publisher network. Additionally, the acquisition provides AOL with access to advertising inventory across Sphere's network, while growing its reach to content publishers via the widget. Sphere was founded in 2005 and is based in San Francisco.

Yahoo And AOL Talk Merger

Yahoo and AOL are in discussions to combine their web operations reports the WSJ. The move is aimed at thwarting Microsoft's bid to acquire Yahoo.

The terms being discussed between AOL would fold into Yahoo and make a cash investment in return for about 20% of the combined entity. The deal which does not include AOL's dial-up access business values AOL at about $10 billion. Yahoo would use the AOL cash investment and put up additional funds to buy back several billion dollars worth of its own stock at a price somewhere in the middle of the range between $30 and $40 a share reports the WSJ.

Chinese Social Network Printing Money

While US social networks are waiting on advertisers to shifting their ad spending their way. Tencent, a Chinese internet portal which operates QQ.com is not banking on advertising. The company reported revenues of $523 million and an operating profit of $224 million. About 60% of the revenue came from services like games, virtual currency called QQ coin (which is fake currency paid for with real money), an additional 21% came from mobile services like ringtones and only 13% came from online advertising. QQ.com is reported to have over 300 million active accounts. Yes you heard that right. That is 8 times the size of Facebook or the same size as the US population.

Facebook on the other hand posted revenues of $150 million in revenue for 2007. The company has raised over $400 million and there is growing nervousness over its valuation and its ability to monetize its user base. Bebo, which was purchased by AOL for $850 million had revenues of just $5 million. MySpace purchased by News Corp. for $560 million is projected to haul in $1 billion this year.

Web 2.0 Bubble Bursting - Crash 2.0 Coming

Dow Jones VentureSource released a report on venture capital investment in Web 2.0 companies Tuesday saying that "investment boom may be peaking."

A total of 178 deals received $1.34 billion in 2007, an 88% increase over 2006. Of that Facebook received $300 and Ning.com received $44 million. The rest of the distribution does not look too good from there. Venture capital investment has been sustaining many Web 2.0 startups, which are often chasing the same users. When the money dries up so will most Web 2.0 companies unless they find a new source of revenue.

U.S. Web 2.0 Investment by Region, 2006-2007

                         2006                           2007
              Deals     Investment (MM)      Deals     Investment (MM)
                     
Bay Area              74         $431               72*         $721*
New England           15         $79                20          $158
Southern California   10         $41                14          $115
New York Metro         9         $18                25           $58
Pacific Northwest      6         $35                13          $140
Southeast              6         $24                 7           $47
Mountain (CO, AZ, UT)  4          $7                 7           $31
Texas                  3         $10                 2            $4
North Carolina         2          $3                 2           $10

*Includes Facebook

"The beauty of Web 2.0 companies is that they can do so much with so little. A few million dollars and they're not only up and running but attracting eyeballs and advertisers. 2008 may be a make-or-break year for many Internet companies with business models relying on advertising. The slumping economy, coupled with a slowdown in click-through rates for online advertising, is going to pose a real challenge to their ability to generate revenues and position themselves for an exit," said Jessica Canning, director of global research at Dow Jones VentureSource.

Web 2.0 Bubble Bursting - Part 1

Bebo Financials

Today's big news is AOL's acquisition of Social Network Bebo for a cool $850 million. Kara Swisher has an excellent piece detailing some of the financial aspects of this mega-deal. She also notes that despite some significant success in the space, Bebo is very much in the shadow of Myspace and Facebook as a social network.

With only $5 million in EBITA for 2007, Bebo is selling at a whopping 160+ times earnings. Big companies tend to do be viewed more favorably than small ones by this EBITA multiple metric, but it is notable that with small and moderate sized website dealings one would expect to pay only about one or two times annual earnings rather than paying in the tens or in this case over one hundred times annual earnings.

This discrepancy is in part due to the fact that large sites are arguably more stable than small ones, but in my opinion this is still a very conspicuous aspect of wheeling and dealing with online companies, and arguably yet another indication that internet bubble two may be ... growing ever larger.

One has to be middle aged to remember when AOL was pretty much the *only* big game in town in terms of online socializing, and I'm sure AOL execs are wishing they had managed to turn more of that early chat room activity and idle banter into a thriving social network like Myspace or Facebook or Bebo.

Can Bebo help AOL regain the former glory it enjoyed in the early days of online activity?

AOL Buys Bebo For $850 Million

AOL is about to acquire Bebo for $850 million. AOL announces the Bebo acquisition. Bebo is the the third place Social Network in the US and far behind both Myspace and Facebook, but it is the first place social network in the British Isles and Second in New Zealand.

Based in London and begun in 2005, Bebo lists these features as major aspects of the Bebo philosophy of social networking:

Open Media: Open Media gives media companies free and open access to Bebo's users worldwide and the Bebo community free and open access to thousands of hours of premium entertainment content from some of the world's best known media brands.

Open Social: In November 2007, Bebo announced that it is joining OpenSocial, a set of common APIs for building social applications across the web. In addition to this Bebo announced plans for a Developers Platform.

Most analysts argue that AOL's internet prospects have been declining for some time, and this move is likely to breath some life into the sagging AOL empire. This also may suggest that AOL and Yahoo are now extremely unlikely to merge given the size of this deal. CNBC has more about this deal and how it might affect the proposed Microsoft takeover of Yahoo.

AOL Advertising President Fired After 5 Months

I met with AOL's (TWX) EVP Curt Viebranz not long ago and now I learn that he is fired. He was appointed the new President of Platform A four weeks ago. Platform A in an umbrella group under which AOL's advertising properties are organized. Curt was previously President of TACODA, a behavioral targeting ad network. Here is a list of their advertising acquisitions to date:


* Feb 2008, Buy.At, online affiliate marketing network
* Feb 2008, Goowy, widget creator
* July 2007, TACODA, behavioral targeting ad network
* May 2007, ADTECH AG, ad-serving and e-mail marketing network
* May 2007, Third Screen Media, mobile ad serving
* May 2006, LightningCast, streaming video/audio ad serving
* June 2004, Advertising.com, direct-response network

Henry Blodget has the scoop on why Curt was fired.

We have been told that Curt was fired by AOL's COO, Ron Grant, because Ron wanted Curt to commit to revenue growth that Curt did not believe was possible given the rapid deterioration of AOL's owned-and-operated properties. We have been told that Curt told Ron he could not deliver Ron's numbers, and Ron sacked him.

We have also been told that the initial Platform A concept was poorly defined and that Curt was essentially destined to fail. Lastly--in contrast to the assertion above--we have been told that Curt was not fired because of revenue targets but because Ron had lost faith in his ability to rapidly and smoothly integrate multiple companies into Platform A (Translation: In Ron's eyes, Curt was incompetent).

Our understanding is that Curt is and was well-respected within Time Warner and is considered a strong executive. One source believes the numbers Ron wants to achieve are very aggressive--accounting neither for the deteriorating economy nor the decline in value of AOL's general portal advertising inventory. The source says revenue at AOL's owned-and-operated properties (a.k.a., the portal) is falling off a cliff, and that the relatively small revenue at Platform A cannot offset this.

AOL To Launch 30 Web Sites Attract Advertisers

AOL plans to launch up to 30 web sites to appeal to a larger audience and attract more advertisers. The plan is launch the sites by the end of 2008 in order to increase its online advertising presence.

Last year, AOL introduced 20 to 30 sites new sites such as "Asylum,'' a men's lifestyle site, and music site "Spinner'' to go after niche interests within broader categories. , said Bill Wilson, executive vice president of programming. He declined to say what kinds of AOL is planning to start this year.

In 2007, as AOL shifted its focus to ad sales to make up for declines in the internet dial-up business, leading to a 32% drop in AOL's fourth-quarter revenue.

AOL Yahoo Talk Merger

The Wall Street Journal is reporting that Yahoo and AOL's parent Time Warner have stepped up talks over creating an alternative to Microsoft's and Google. The talks center on a deal that would fold Time Warner's AOL Internet unit into Yahoo. If the merger is successful and executed well it could be a strong alternative to Google & Microsoft.

AOL has been organizing all their advertising divisions into a single unit to better compete with Google (GOOG), Microsoft (MSFT), Yahoo (YHOO) and ad networks such as Facebook and MySpace. (NWS).

Web 2.0 Bubble (Bomb 2.0) Is Bursting

ZDNet has a great article comparing the events that lead to the bursting of of the first internet bubble (Dot Com Bomb) to the bursting of the Web 2.0 bubble called Bomb 2.0. The article suggests that Bomb 2.0 is underway. Google is down 27% since the start of the year. Just as Time-Warner set off Dot Bomb 1.0 by acquiring AOL, Microsoft may have set off the second through its bid for Yahoo. More>>

OpenID Experts at Web 2.0 Conference

If you are interested in OpenID, OAuth, OpenAuth and related technologies, come hear the high-powered panel on this subject at the WebGuild's Web 2.0 Conference and Expo at the Santa Clara Marriott on January 29, 2008.

The distinguished panelists will be:

• Johannes Ernst, Founder & CEO, NetMesh
• George Fletcher, Chief Architect Identity Services, AOL
• John Panzer, Technical Lead Manager, Google
• Nico Popp, VP, Authentication Services, VeriSign
• Shreyas Doshi, Sr. Product Manager, Identity Products, Yahoo! Inc.

The panel will begin at 1:45 PM and will be exploring whether these technologies are ready for prime time and what's coming, why Google, Yahoo!, AOL and VeriSign have implemented what they have already, and what's in it for you as a web developer or web business.

If you have questions you'd like to ask the panel post them here.

Google Tops Search Market

Google Search dominated the online search market in November according to a report by Nielson Online. Google grew its share of the U.S. online search market to 57.7% with 4.25 billion searches in November from October's 55.5%.

Yahoo came in second with 1.32 billion searches and a decreased market share of 17.9% from 18.8% in the previous month.

Microsoft Live was third with about 880 million searches and a decreased market share of 12% from 13.8% in October.

AOL was number four with approximately 332 million searches accounting for a 4.5% share.

AOL Desktop Organizes Your Online Life

The new, free software out from AOL called AOL Desktop aims to help you organize your online world. Users download the software which is designed for Windows Vista® and XP and off they go. Some of the features it boasts are:

• improved app navigation via an AppMap button that lets users get a thumbnail view of open windows


• tabbed browsing on browser, email, and IM windows


• fully customizable toolbar for quick access to sites, content, email, IMs, etc.


• built-in AIM so users can access multiple email accounts like Gmail, Verizon, etc. in the same window

Web Video Ads Increase Web Site Traffic

There is a high correlation between online video ads watchers and an increase in web site traffic. Online video watchers are more likely to act after watching web video ads. This is according to an online survey conducted by Google and AOL, as part of larger effort to get marketers to move their ad budgets from other mediums such as television to online video advertising.

- 78% of respondents said that online video ads provide as much or more of an opportunity to learn about an advertiser than television
- 64% of respondents indicated they have taken action after seeing an online video
- 44% went to a company's Web site after watching an online video ad
- 33% searched for the product or service after watching an online video ad
- 22% visited a bricks and mortar store
- 21% discussed the advertised product with friends or family

75% of respondents survey said they watched more video online than they did a year ago and more than 50% expect to watch more online video in the next year. Further, 32% characterized the feature product as "innovative", 32% said it was "creative" and 30% said it was "fun".